Bank of England Raises Interest Rates to 4.00%

Today, the Bank of England has announced that they are increasing the base rate to 4.00%.

Interest rates can have an impact on a wide range of areas including mortgages, borrowing, pensions and savings. The Bank of England has continued to increase the base rate to try and tackle rising inflation (cost of living)1, which in general terms, has been attributed to the increase in energy costs, higher prices for goods from abroad, a buoyant job market and businesses charging more for products.

Some steps you can take to help to manage further interest rate rises on your mortgage.

We'd suggest taking a more proactive approach when looking at your finances, acting now could help. Every person has different circumstances, we strongly recommend you look at the terms of your mortgage and contact an adviser first, they could help identify your options and provide advice that centres on your needs and circumstances.

Mortgage rates could be better than you think.

Despite the changes throughout last year, the market has shown positive signs of stability and a gradual return to pre-pandemic levels, according to a press release by UK Finance.2

Whilst they have predicted a drop in mortgage lending, there is an indication that there will be a strong demand for refinancing (also known as remortgaging), with deals coming to the end of their initial terms.

It might be a good opportunity this year to take a proactive approach when it comes to advice, especially if it’s something you’ve previously put off.

Contact your adviser to book an appointment to see what they can help you with.

How will today’s rate change affect me?

How the rate might affect you will depend on what mortgage you're on and when your deal comes to an end. If you don't know, check your paperwork or get in touch with your adviser to discuss your existing mortgage arrangement.

The good news is that if your mortgage is on a fixed rate, your monthly repayments will be unaffected by the rate rise for the period it is fixed for. Those with fixed rate mortgages are likely to be affected once they reach the end of their current deal. An interest rate rise could make remortgaging more expensive.

If you have a variable rate tracker mortgage that is linked to the Bank of England base rate, you are likely to see an immediate impact on the amount you repay. Those on a Standard Variable Rate (SVR) could see an increase which is decided by the lender. If you are unsure, it is worth checking your mortgage terms and conditions in your mortgage offer document.

For readers who are still on a variable rate, or are coming to the end of their fixed rate period, contact your adviser to see how they can help.

Article supplied by SJ Financial Solutions - Stuart Mosley

Stuart Mosley (CeFA, CeMap, CLTM) founded SJ Financial Solutions in June 2005 having spent 12 years with big corporates such as Halifax and Santander. He felt the personal touch and straight speaking was missing from mortgage and protection services and set up SJ Financial Solutions to change this. If you would like to get in touch, please see contact details here.

Published: 02 February 2023